Principle Insurance will offer Sharia-compliant motor and home insurance
Britain’s first independent Islamic insurance company has received authorisation by the FSA.
Principle Insurance will provide unique, Shariah-compliant (or Halal) motor and home insurance to British residents from later this year. It claims to be the first independent Shariah-compliant insurance provider in Britain. Britain has an estimated two million Muslims.
Principle’s Halal motor insurance will be available from the end of the second quarter of 2008 and will be available on-line or over the telephone.
Principle chairman, Mr Abdulaziz Hamad Aljomaih said: "I believe Principle will go some way in altering the perception of Islamic Finance in the UK, by showing that progressive, sensible and profitable businesses can be established in accordance with Islamic law. Achieving FSA authorisation is a clear vindication of my belief that Shariah-compliant financial products are not only equitable and profitable but also conform to the modern day principles of international finance, especially from a regulatory standpoint"
Principle chief executive, Bradley Brandon Cross, said: “Some elements of conventional UK insurance, such as the earning of interest, the investment of policyholders’ funds and uncertainty mean that it is not in accordance with Muslim beliefs. We are going to be offering unique insurance products that meet a genuine need and are also competitively priced.”
Islamic insurance is different to conventional insurance in that it is fully Shariah compliant (or Halal) and does not use interest or invest in any industries that go against Islamic teachings (alcohol, for example).
It does, however, bear some similarities to co-operative insurance. As with co-operative insurance, policyholders contribute money to a common pool (the Takaful fund), which is then used to pay claims. Any surplus in the Takaful fund is returned to policyholders, while any deficit is protected by the company’s shareholders.
The insurance company is usually remunerated in one of two ways - either by an agreed management fee (Wakala) or a share of the surplus (Mudharaba).
Principle Insurance has adopted the Wakala model, as it provides greater transparency. All the activities of the Takaful Fund are supervised and agreed with a board of Shariah scholars.